US DOJ Moves to Block AT&T Merger

The US government sued to block AT&T’s proposed $39 billion acquisition of T-Mobile USA saying the deal would "substantially lessen competition" in the wireless market. AT&T shares fell as much as 5 percent, while Deutsche Telekom took a real beating at the European stock exchange, dropping down to 8.8 EUR per share.

The Department of Justice (DOJ) said in its legal brief: "AT&T’s elimination of T-Mobile as an independent, low- priced rival would remove a significant competitive force from the market." If the DOJ and Federal Communications Commission (FCC) reject the proposed deal then AT&T will have to pay T-mobile $3 billion in cash. AT&T would also have to give T-Mobile USA wireless spectrum in some regions and reduce charges for calls into AT&T’s network, for a total package valued at as much as $7 billion.

AT&T attorneys "accidently" sent information earlier this month to the FCC which showed that for less than four billion USD in upgraded equipment, 95 percent of AT&T customers could be covered versus the $39 billion buy out of T-mobile. Karl Bode at DSLReports has a good overview of that error. Another excellent analytic source is Harold Feld at Public Knowledge.

The questions is will the DOJ and the FCC actually have the backbone to stop AT&T? Or will they fold their cards and let AT&T create a bigger monopoly?

Bloomberg ended their article with:

"Given the size of the cancellation fee that was negotiated into his agreement, AT&T has the incentive to fight," said Andrew Gavil, a law professor at Howard University in Washington. "The fact that the Justice Department is challenging the deal doesn’t mean they won’t negotiate a resolution at some point." With a tip of the hat to complaints regarding outsourcing American jobs, AT&T promised to return several thousand jobs from overseas call centers back to the US. The case is US v. AT&T Inc., 11-01560, US District Court for the District of Columbia (Washington).